The Bank of England has voted to increase UK interest rates for the first time in more than a decade. - 02/11/2017

The Bank of England has voted to increase UK interest rates for the first time in more than a decade.

Interest rates were adjusted from 0.25 per cent to 0.5 per cent in a bid to keep a lid on inflation. The last hike took place in July 2007.

The bank's Monetary Policy Committee (MPC) voted for the rise at a majority of 7-2.

The MPC expects inflation to peak above 3 per cent in October as the weakening of sterling and increases in energy prices are passed to the consumer. However, inflation is expected to fall back over the next year.

In a summary of its monetary policy, the MPC said: "The decision to leave the European Union is having a noticeable impact on the economic outlook. The overshoot of inflation throughout the forecast predominantly reflects the effects on import prices of the referendum-related fall in sterling.

"Uncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly. And Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures."

Speaking of the interest rates rise, the MPC added: "Monetary policy continues to provide significant support to jobs and activity in the current exceptional circumstances. All members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.

"There remain considerable risks to the outlook, which include the response of households, businesses and financial markets to developments related to the process of EU withdrawal.

"The MPC will respond to developments as they occur insofar as they affect the behaviour of households and businesses, and the outlook for inflation."

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